Some Insurance Reform May Be Possible This Year : Politics: A new effort for no-fault auto coverage is expected to begin soon. Plans are made to circulate petitions for a universal health care program.

The political deadlock over insurance reform in California spread last year from auto and health into a fresh area of controversy--workers’ compensation--but forces are gathering that may bring some change in 1992.

A new effort to bring no-fault auto insurance to the state is expected to begin soon, with petitions being circulated for a November ballot initiative that will probably be supported by Gov. Pete Wilson and Insurance Commissioner John Garamendi.

The proposal by two Republican lawmakers, Sen. Frank Hill of Whittier and Assemblyman Ross Johnson of La Habra, would create a $220-a-year bare-bones policy with $15,000 in protection for all good drivers with at least three years of driving experience. Hill has said the premium cost would be guaranteed through 1995.

Meanwhile, a Los Angeles group, Californians for Universal Health, plans to circulate petitions for a health insurance initiative to express the voters’ “intent” to have the Legislature institute a universal health insurance system, based partly on employer contributions, by 1997.

Vast sums are at stake in any fight over changes in the insurance system. More than $44 billion was paid in premiums in 1991 in California for three categories of insurance coverage--auto, health and workers’ compensation. Even minor changes in the law can bring vast swings in earnings to attorneys, doctors, insurers and others involved in the field.

Already, trial lawyers and attorneys who represent workers’ compensation applicants have been building up their campaign war chests to defend their interests, either through initiative expenditures or contributions to legislators. On the other side, the first overtures have been made to insurers and business to bankroll the no-fault auto initiative.

Besides the two initiatives--and a new push from the governor to change the workers’ compensation system through legislation to curtail stress claims--Garamendi and district attorneys around the state have pledged to make greater efforts to reduce insurance fraud this year.

In auto insurance alone, Garamendi said, fraud may amount to more than $1 billion a year. In 1991, prosecutions against lawyers, doctors and others accused of abetting false claims increased slightly from token levels. The Legislature has provided more money for this year, and the assault on corrupt professionals will intensify.

Both the no-fault auto initiative and Wilson-sponsored workers’ compensation reforms will be fought hard by well-financed trial lawyers and other attorney groups, who oppose any limits on the right of accident victims and disability claimants to sue and collect large damages.

The attorneys--many of whom rely on the insurance systems as their main income--are almost certain to be joined by medical practitioners who also profit from higher insurance claims and sometimes earn good incomes by providing expert testimony in personal injury and workers’ compensation cases.

Already, Ian Herzog, president of the California Trial Lawyers Assn., and Will Glennon, a Sacramento representative of the group, have said they will argue that no-fault insurance--billed by its proponents as the best way to save money on auto insurance by driving lawyers out of the system--will raise insurance prices for most motorists.

But Wilson’s chief insurance adviser, Marjorie Berte, blames high lawyers fees not only for rising insurance prices but also for making American business non-competitive with its rivals abroad. “They’re an overall drain, a phenomenon unique to America,” she said of lawyers.

Although some consumer leaders will support no-fault, the country’s best-known consumer advocate, Ralph Nader, adamantly opposes it. “If (no-fault advocates) want to open up a Pandora’s box, let them push deceptive, no-solution no-fault,” Nader said recently. “There should be a solution to these problems without cutting back people’s rights (to sue).”

Qualifying a ballot initiative for a bare-bones no-fault policy may be costly. Legislators Hill and Johnson delayed asking the attorney general’s office for a formal title and summary of the initiative for nearly a month, meaning that they might have less than the usual 150 days to get enough signatures for the November ballot. Hurrying the circulation of petitions to meet the deadline may cost $1 million.

A less-expensive battle is envisioned over the health insurance initiative because it represents only a statement of principles, and the details would be hammered out later by the Legislature, if anything is done at all. “Intent” initiatives sometimes end up leading nowhere.

In any case, the poor economy and the state’s continuing budget deficit have been impeding action on health insurance, in part because any extension of state-mandated coverage might entail higher taxes.

At the beginning of 1991, most of the attention in California insurance issues was focused on the struggle to implement Proposition 103, the rate regulation and rollback initiative adopted by the electorate in 1988.

A little progress was made by Garamendi in 1991. He drew up rollback regulations for 1989 premiums, and one major company, the Automobile Club of Southern California, rebated more than $100 million.

But as 1992 begins, almost all other insurance companies are still refusing to pay the rollbacks, and a long court fight over them remains likely. Some of Proposition 103’s other provisions, such as regulating rate increases, have yet to be implemented.

With such meager results, attention has shifted toward other insurance reform proposals. Many now feel that Proposition 103 by itself can probably do little to ease either high insurance prices or make coverage easier for some buyers to get.

The Legislature continues to be stymied in passing no-fault, limits on workers’ compensation claims or a meaningful extension of health insurance. It is heavily influenced by powerful conflicting special interests and has been unable to choose from among them.

Each interest has proved able to defend itself. But none has the clout to achieve its goals over the resistance of the others.

As long as four years ago, before the 1988 ballot “war” of five auto insurance initiatives, state Sen. Herschel Rosenthal (D-Los Angeles) remarked that unless the rival trial lawyers and insurers could agree on what legislators should do, the lawmakers would not be able to act. Rosenthal said last month that that is still true.

Meanwhile, the number of special-interest lobbies has been growing, particularly in the workers’ compensation area, where the Legislature may be most likely to act on reform in 1992.

As Alan Tebb, general manager of the California Workers Compensation Institute, said recently: “It used to be workers’ comp was a labor-management issue.

“It hasn’t been that way for a long, long time,” he said. “Now, you have the insurers, the defense Bar, the applicants’ Bar, the treating doctors, the forensic physicians, the rehabilitation providers, the lien claimant organizations, and on and on.

“All of these groups are organized, all have political capital and all are represented by lobbyists in Sacramento. And the reality is whenever you legislate, you affect the interests of one or more, most of the time all of these groups, for better or worse.”

So, he concluded, it may be difficult for the lawmakers to act.

Leadership for change has passed to Garamendi and Wilson, who are political rivals but seem in agreement on some reforms.

Garamendi and the governor have endorsed no-fault, under which many accident injury treatments and other losses are paid by one’s own insurer regardless of blame.

The main difference between them is that Garamendi is in many particulars also a sharp critic of the efficiency and procedures of the insurance business, while the governor seldom, if ever, criticizes it.

Garamendi has also followed a policy of “rate suppression,” refusing almost all premium increases in auto and workers’ compensation insurance since taking office. (He has no authority to regulate health insurance).

By contrast, Wilson’s insurance adviser, Berte, is critical of rate suppression, suggesting that it could backfire: Companies dissatisfied with their rates of return could drop their California business or shift sales away from urban areas where claims are the most numerous.

Wilson intends to keep the pressure on the trial lawyers.

Just before Christmas, he named a new Council on California Competitiveness to develop ideas to keep businesses from fleeing the state and to aid the California economy in general. Its chairman, 1984 Olympic chief Peter V. Ueberroth, has said that many of its recommendations are likely to deal with reducing the lawyers’ “disruptive” role.